Growth in employment and disposable income will revive driving rates, bolstering demand
Los Angeles, CA (PRWEB) July 24, 2012
The Tire Dealers industry is recovering quickly from recession-induced declines. Changes in consumer preferences toward more fuel-efficient tires and pent-up replacement tire demand have helped the industry turn around. After suffering through the recession, revenue increased 8.3% in 2011 and will experience further growth of 5.3% in 2012 to reach an estimated $30.0 billion. “The recession plagued the overall automotive sector,” says IBISWorld industry analyst Radia Amari, “but tire dealers managed to evade a direct hit to their operations.” Instead, the effects of the recession trickled down to consumers who, in light of rising unemployment and diminishing disposable income, chose to maximize the longevity of their old tires and forego replacement, hurting tire sales in the process. As a result, the industry endured serious revenue losses of 12.5% and 7.4% in 2008 and 2009, respectively. Despite recent improved performance, the lingering effects of the recession have caused industry revenue to decrease at an average annual rate of 0.5% during the five years to 2012.
Volatile input costs translated to unstable profit margins over the past five years. In line with growing global demand, rubber and steel prices climbed in 2007 and 2008, cutting into industry profit margins. However, tire dealers are expected to post solid margins in 2012, largely due to sales of low-rolling resistance tires. Generally, these tires are less expensive to produce but are also less durable, leading to more frequent replacement. In addition, industry consolidation has boosted profit margins for tire dealers. Dealerships have improved their operating efficiencies by cutting costs. The Tire Dealers industry’s major players, Sumitomo Corporation, Discount Tire Co. and Les Schwab Tire Centers, used their significant scope and reach to outperform the industry’s overall growth over the past five years.
The next five years will likely be brighter for the industry. As the US economy gains steam, disposable income will rise, bolstering tire sales. More consumers will likely get behind the wheel as they have more money in their pockets. In addition, as unemployment eases, more people will commute to work. This anticipated growth in miles driven will lead to higher tire demand. Furthermore, federal mandates on fuel efficiency will increase demand for the already popular low-rolling resistance tires that require replacement more often. Consequently, industry revenue is forecast to rise during the five years to 2017. For more information, visit IBISWorld’s Tire Dealers in the US industry report page.
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IBISWorld industry Report Key Topics
The Tire Dealers industry retails tires and tire tubes for passenger cars, sport-utility vehicles and commercial trucks. Businesses that offer maintenance services in addition to tire sales are included in this industry; however, mail order and online tire sellers are excluded.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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